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US Supreme Court reiterates inherent exception to patentability and test of inventive step

26 June, 2014

In Alice Corporation Pty. Ltd. v. CLS Bank International, decided on 19-6-2014, the US Supreme Court held that the respondent patents – method claim were invalid. It reasoned that using a computer to implement the steps of process does not transform abstract idea into a patent-eligible invention.

Third party mediated settlement – fundamental economic practice

The patents at issue were method claims and involved creating a shadow electronic record  which were reconciled with the parties accounts permitting only those transactions for which the parties’ updated shadow records indicated sufficient resources to satisfy their  mutual obligations. It followed that the process could be done even without using computers. The claims did not purport to improve the function­ing of the computer itself or effect an improvement in any other tech­nology or technical field. The Court however refused to go into the contours of an abstract idea to examine whether mediated settlement was a ‘pre existing fundamental truth ‘. It was enough to determine that the concept was an abstract idea.

Inventive step

The Supreme Court emphasised that patent eligibility should not depend on a draftsman’s art. The steps in the process could be performed by any generic computer and involved a data processing system with a communications control­ler and data storage unit. Accordingly the Court held that this cannot be termed as ‘specific hardware’ performing specific computerised functions. The systems claims were thus no different from the method claims in substance and only recited a ‘handful of generic computer components’ configured to implement the abstract idea.

Thus, the Supreme Court upheld the Federal Circuit decision that the patents were invalid since they fell under the exception implicit in 35 U.S.C. § 101.
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